Taxable Income is a critical concept in individual and business taxation. It represents the amount of income earned within a specific period that is subject to income taxes after adjusting for deductions, exemptions, and other exclusions allowed by tax authorities. For individuals, taxable income is calculated by taking total income, such as wages, dividends, and capital gains, and subtracting deductions like standard deductions or itemized deductions, as well as exemptions like those for dependents. For businesses, taxable income is derived from total revenue minus allowable business expenses and other specific adjustments provided for by tax regulations. \n\nFor example, if a person earns $50,000 a year in wages and qualifies for $12,000 in deductions, their taxable income would be $38,000. Taxable income forms the basis for calculating the total income tax liability an entity owes to the government. Understanding how your taxable income is calculated can help with tax planning and ensuring compliance with relevant tax laws.